In the beginning it appeared that iPhone exclusivity was a big win for AT&T. It got PR buzz and corresponding sex appeal; it seemed to gain a lot of new subscribers too. However, there have been bottom line costs as it bears a substantial subsidy ($400 per handset) and customers see AT&T as the bad guy when problems occur.

In addition the NY Times (in a piece about iPhone users heavy data requirements) cites a PriceGrabber consumer survey that reveals barriers to further growth:

[A] recent survey by Pricegrabber.com found that 34 percent of respondents pinpointed AT&T as the primary reason for not buying an iPhone.

This is certainly true for me. I would own and iPhone but for the AT&T requirement. AT&T's brand and reputation have suffered lately, probably more than they've gained from the iPhone relationship -- especially the in wake of the 3Gs launch and network problems. The Wall Street Journal elaborates on the mixed blessings of iPhone exclusivity:

While AT&T has disclosed at least 10 million activations of iPhones since it became available in mid-2007, only about 40% of those were new customers. That number dropped to 35% in the most recent quarter when the 3GS phone became available.

That means only four million new customers signed up, about 5% of AT&T's total, or 6% of "postpaid" customers on costly monthly contracts . . . More important, perhaps, is that the iPhone likely has kept some AT&T customers from defecting. AT&T's churn, the percentage of customers who leave, has dropped to 1.49% from 1.7% since the third quarter of 2007. Over the same period, Verizon Wireless's churn has risen to 1.37% from 1.27%.

Then there is the extra revenue. AT&T has consistently said iPhone customers generate much higher revenue per user than the average, close to $100 a month. AT&T's "postpaid" average revenue per user has risen 4.7%, to $60.21, since the third quarter of 2007.

Apple is increasingly looking to move beyond exclusive deals, recently breaking O2 exclusivity in the UK, which helped the phone come to market intially. There's a question about whether AT&T will be able to retain Apple exclusivity (now being probed by the FCC) beyond next year, although the company would like to retain it until 2011 according to various reports.

Indeed, non-exclusivity is the key to future iPhone growth. Android, the Pre and Windows Mobile all would be threatened further if the iPhone were equally available on Verizon, T-Mobile and Sprint.